Banks' SMA-2 loans rise in Q2FY25 even as overall asset quality improves

SMA-2 loans

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26 Aug, 2025 12:21

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Overdue loans, classified as SMA-2 (Special Mention Accounts) increased for at least eight banks, even as asset quality of banks improved in the July-September quarter, a Moneycontrol analysis showed.

Those loans that have been overdue for more than 60 days and up to 90 days are considered as SMA-2.

Banks that have seen an increase in SMA-2 loans are Jammu and Kashmir Bank, RBL Bank, Bank of Baroda, Punjab National Bank, Bank of Maharashtra, Indian Bank and Canara Bank.

Few bank’s head attributed the rise in these accounts to some state or central government accounts falling in this category due to delay in payments.

Bank of Baroda’s SMA-1 and SMA-2 loans have increased to 0.47 percent of the total advances in the July-September quarter, as compared to 0.22 percent a year ago.

RBL Bank’s SMA-2 loans increased to 1.48 percent in Q2FY25, as compared to 0.36 percent in Q2FY24.

Similarly, state-owned lender Canara Bank has also seen an uptick in SMA 2 loans to 1.08 percent of the total advances, as compared to 0.48 percent a year ago.

“There is one central state-owned company from steel sector that has been added to the SMA 2 category in the last quarter, and now it has been continuing in this quarter too. Additionally, one state government’s irrigation project has fallen in to SMA 2 category. The exposure is around Rs 3,000 crore, which is guaranteed by state,” said Canara Bank’s managing director and chief executive officer K Satyanarayan Raju.

Even though few banks have seen an increase in SMA-2 loans, the asset quality of most banks has improved in the September quarter.

As per Moneycontrol’s analysis, net NPA (non-performing asset) ratio of the state-owned bank remained in the range of 0.20-0.98 per cent. While for the private banks, it has stayed in the range of 0.2-1.50 per cent in Q2FY25.

In August, Finance Minister Nirmala Sitharaman acknowledged the efforts made by the banks to improve the asset quality and advised them to optimise the scope of resolution and recovery offered by NCLT (National Company Law Tribunal) and NARCL (National Asset Reconstruction Company Ltd).

Few banks, such as Bank of Baroda (BoB) and PNB, have seen a recovery from some accounts, which was pending in NCLT for resolution.

BoB’s MD and Chief Executive Officer (CEO), Debadatta Chand, told Moneycontrol, that resolution of a number of large accounts by NCLT has translated into higher recoveries for bank in Q2FY25.